Should you get a fixed-rate or adjustable-rate mortgage? Compare side-by-side — see worst-case total interest, payment shock, and get a personalized recommendation.
A homebuyer plans to stay 5 years and compares a 30-year fixed at 6.5% with a 5/1 ARM at 5.0% on a $350,000 loan.
Fixed Monthly Payment: $2,212.67
ARM Initial Payment: $1,878.79 (saves ~$333/month)
5-Year Total Cost (Fixed): $122,378 in payments, $108,939 in interest
5-Year Total Cost (ARM): $112,727 in payments, $99,288 in interest
Savings with ARM (5 years): ~$9,651 saved
The ARM saves money because the buyer moves before any rate adjustments kick in. This is the ideal ARM scenario.
A homebuyer plans to stay 10+ years with the same loan terms: $350,000, 6.5% fixed vs 5/1 ARM at 5.0%, margin 2.5%, annual cap 2%, lifetime cap 5% above initial.
Fixed Total Interest (30yr): $446,561
ARM Worst-Case Total Interest: $516,388 (starts at 5%, jumps to 7% → 9% → 10% max)
ARM Best-Case Total Interest: $379,815 (if index stays flat, rate = margin + index)
Payment Shock: From $1,878.79/month to $3,071.95/month — a 63% increase
If rates rise significantly, the ARM can cost substantially more than the fixed-rate option.
A borrower takes a 7/1 ARM on $400,000 at 5.25% initial rate, planning to stay 7-8 years.
Fixed (6.5%) Payment: $2,528.77
ARM Initial Payment: $2,208.80
7-Year Savings vs Fixed: ~$26,877
Worst-Case Year 8 Payment: $2,693.12 (after 2% cap increase)
A 7/1 ARM offers a longer fixed period, reducing the risk of early adjustments while still providing a lower initial rate than a fixed mortgage.
This calculator compares two mortgage types using standard amortization formulas. The fixed-rate mortgage uses a single interest rate for the entire loan term. The adjustable-rate mortgage (ARM) has an initial fixed period followed by periodic adjustments based on market index rates.
The initial number of years the ARM rate stays constant. Common terms: 3/1 (3 years), 5/1 (5 years), 7/1 (7 years), 10/1 (10 years).
The benchmark interest rate (like SOFR or LIBOR) that the ARM is tied to. When the index moves, your rate can change.
A fixed percentage added to the index rate to determine your fully indexed rate: Fully Indexed Rate = Index + Margin.
Limits on how much the rate can change. Annual cap (per adjustment, typically 2%), and lifetime cap (over the loan life, typically 5-6%).
The sudden increase in monthly payment when the initial fixed period ends and the rate adjusts. This can be hundreds of dollars per month.
The length of time you need to stay in the home for the ARM to be cheaper than the fixed rate. If you sell before this point, the ARM wins.
You plan to move within the initial fixed period (3-10 years), you expect rates to stay flat or decrease, or you need the lower initial payment to qualify.
You plan to stay long-term (10+ years), you prefer predictable payments, rates are near historic lows, or you're risk-averse about future rate increases.
Choosing between a fixed-rate mortgage and an adjustable-rate mortgage (ARM) is one of the most important financial decisions a homebuyer can make. A fixed-rate mortgage locks in your interest rate for the entire loan term, providing predictable monthly payments and protection against rising rates. An ARM offers a lower initial rate for a set period (typically 3, 5, 7, or 10 years), after which the rate adjusts periodically based on market conditions.
The right choice depends largely on how long you plan to stay in the home. If you expect to move or refinance within the initial fixed period, an ARM can save you thousands of dollars. If you plan to stay long-term, the stability of a fixed-rate mortgage protects you from future rate increases and provides peace of mind. Our calculator simulates both worst-case and best-case ARM scenarios to help you make a fully informed decision.
Payment shock occurs when the ARM's initial fixed period ends and the rate adjusts to a higher level. If rates have risen significantly, your monthly payment can increase dramatically — sometimes by hundreds or even thousands of dollars per month. This calculator shows the maximum possible payment shock under the worst-case adjustment scenario, as defined by your ARM's annual and lifetime caps.
For example, on a $350,000 5/1 ARM starting at 5.0%, the initial monthly payment is about $1,879. In a worst-case scenario where rates hit the lifetime cap, the payment could jump to over $3,000 — a 63% increase. This is the risk you accept in exchange for the lower initial rate.
When an ARM adjusts, the new rate is determined by adding the margin (a fixed percentage set in your loan contract) to the current index rate (a benchmark like SOFR). However, the actual rate change is limited by two caps:
Limits how much the rate can increase in a single adjustment period. For most ARMs, this is 2 percentage points per year.
The maximum interest rate allowed over the entire loan term. Typically 5-6 percentage points above the initial rate.
Here are key strategies to help you decide which mortgage type fits your financial situation:
If you'll move within 5-7 years, a 5/1 or 7/1 ARM typically saves money. If staying 10+ years, a fixed rate protects against future rate increases.
When fixed rates are high, ARMs offer a compelling discount. When rates are low, locking in a fixed rate for the long term makes more sense.
Before choosing an ARM, make sure you can afford the maximum possible payment. Use this calculator to see what your payment could become.
Many ARM borrowers plan to refinance before the initial period ends. Keep an eye on closing costs and your break-even timeline.
⚠️ Important Disclaimer: This Fixed vs Adjustable Rate Mortgage Calculator is for informational and educational purposes only. It provides estimates based on standard amortization and ARM adjustment formulas. Actual ARM terms vary by lender; always read your loan documents carefully. This tool does not account for fees, taxes, insurance, PMI, or prepayment penalties. Results should be verified with your lender or financial advisor. This calculator does not provide financial advice.